Tokenization Presents Liquidity Benefits but Challenges Remain, Says Bank of America

Tokenization represents the next evolution in financial asset management, offering distinct advantages over traditional structures while introducing new risks, according to a Bank of America report. The process converts real-world assets—from equities to real estate—into blockchain-based digital tokens, building on innovations like ETFs and mutual funds.

Analysts highlight enhanced liquidity as a key benefit, with 24/7 trading potentially unlocking secondary markets for illiquid private assets. Settlement times could shrink from days to moments, while fractional ownership lowers barriers to entry for investors. Blockchain's transparent ledger system further strengthens auditability and reduces reliance on intermediaries.

Despite these advantages, widespread adoption faces significant hurdles. Regulatory uncertainty, technological complexity, and institutional inertia present formidable challenges to mainstream implementation. The report suggests tokenization's success hinges on overcoming these obstacles while preserving the integrity of financial markets.